Senior editor at Worth magazine. Formerly freelance in Guatemala, writer at Columbia Business School. Covering politics, sports, business and culture.

Jun 24, 2016

BREXIT AND HISTORY: IN THE END IT WAS PREDICTABLE

Courtesy of Wikimedia Commons

Financial markets were thrown into turmoil when the United Kingdom voted to leave the European Union yesterday. The NASDAQ was down more than 4 percent, its worst showing since 2011. Five hours before the final tally of the vote, betting markets still gave a “REMAIN” vote an 88 percent chance. Polls, even an exit poll by Sky News just a few hours before the official result was in, indicated that the vote would swing to “REMAIN.” Who could have predicted it?

The simple answer is that history predicted it. The idea that Britain, France, Germany and (if President Erdogan has his way) Turkey would all be in a mutual economic and military union — even devolving control of their borders and currency to a central government — would have been laughable 100 years ago at the height of World War I, and for all of history leading up to that point. Just 70 years ago, the United Kingdom was the last bastion against fascism on the continent, and the plucky British prevailed, thank you very much, because they were an island apart.

Sure, a thousand odd years ago the Normans conquered Britain, but then, in a way, it conquered them and they slowly lost all of their continental castles and lands. England was involved in numerous wars against the French: In 1815 they kicked Napoleon’s continental butt at Waterloo. The Romans, of course, tried to bring Europe under one rule (just as Hitler and Napoleon tried in imitation). They did get a foothold on the island for a while, but failed to ever really bring the Germans into the fold and quit Britain as soon as their power began to wane. Even when they were there, they half-assed it, building a wall and ignoring everything North of it.

Even a shallow look at history says that European unity in general, not to mention Britain’s inclusion in any kind of continental project, is an historical anomaly. Starting with the Romans, the first point when disparate parts of Europe were really aware of each other and there was any sense of connectivity, out of the 2000 plus years of history since, only the last 64 since the creation of the European Coal and Steel Community have involved even the slightest willing movement towards unity. It was only in 1973 that the UK decided to join the European Economic Community. To think that our present era is in some way special is the height of arrogance.

Only in the aftermath of World War II was European unity even cursorily considered. Why? Well, the continent had faced an economic shock and needed to be rebuilt, Europe’s people were desperate for peace at any cost, and its two economic behemoth’s, France and Germany, were in particularly sorry shape, making them both seem, momentarily, weaker and less like they would overwhelm the capacities of their poorer, smaller neighbors.

The other, more important, factor is that European economic unity acted as a bastion against the Communist bloc to the east. Integration and unity served to strengthen capitalism by increasing interdependence between nations that were normally, in a historical sense, ambivalent towards each other. Europe was deeply fearful of Communism, which was not only massively powerful in the East, but also a sort of cancer within because of the division of Germany. Cooperation and unification were the only way to prevent Communism from enveloping all of Europe.

But the Soviet Union fell apart a quarter century ago. And yes, Russia is resurgent, but in a far less ideologically threatening way. No one believes that Putanism holds any appeal for anyone besides his cronies and select bunch of oligarchs and wannabes in Eastern Ukraine. Without the threat of Communism, European unity lacked a raison d’etre. The solution was the Maastricht Treaty in 1992 and then in 2002 the implementation of the euro. A common currency, it was thought, would generate such wealth and prosperity that national sovereignty would be overwhelmed. It was, in essence, the ultimate culmination of capitalism — coin over kingdom for the good of all. The only problem is it hasn’t worked out so hot.

The euro zone crisis has dragged on interminably for years. Will Greece leave? Will it stay? How much austerity can Germany and the European Central Bank really force on creditor nations like Greece? (Quite a lot, it turns out). The euro could have been effective, but it was hamstrung from the very beginning because of a fundamental flaw in the creation of the ECB. It does not have the authority to issue bonds. So the ECB was missing one of the most important tools of monetary policy: the ability to issue debt against the strength of the entire economy backing the currency. It could print money, and loan money, but that was all. For Greece, ground zero of the crisis, all that was available was taking out loans, essential from individual creditor nations, i.e. Germany. It cannot refinance against the combined economic strength of all of Europe. So the euro and Eurozone have struggled.

Which brings us back to the United Kingdom. They were never all-in with the European project; they kept the pound, after all, as a kind of insurance policy if things didn’t work out. The sovereign debt crisis and the inability of Europe to solve it has led to moribund economic growth. And if a unified Europe is not able to deliver on its promise of prosperity for all, in a historical sense, what does the United Kingdom gain? A majority of British, the Brexit result tells us, see only a loss of national identity. And 2000 years of history, more than the disaffection of industrial workers or xenophobic rejection of immigration, is really what caused them to leave.

The United Kingdom has never really been a part of Europe, and with the European Union, they only dipped their toe in to find out if the temperature was right. It wasn’t. And sure, the next few years will likely be tough for the British — it will definitely hit the economy hard — but the British people historically haven’t minded toughing it out. What they haven’t liked, historically, is being told that they have to participate in someone else’s plan.